Wednesday, April 11, 2018

ADB projects economy to grow by 4.9 per cent

Asian Development Bank (ADB) has revised the economic growth projection slightly upwards to 4.9 per cent from earlier 4.7 per cent in the current fiscal year.
In its 'Macro-Economic Update Report' released in Kathmandu today, the multilateral lender projected 4.9 per cent growth – though the government in its mid-term budgetary review – has lowered the economic groth forecast to 6 per cent from the forecast of 6.5 per cent. In the last fiscal years, the country had witnessed economic growth of 6.9 per cent.
In the coming fiscal year 2018-19, the country’s growth is expected to improve to 5.5 per cent along with the completion of the country’s highest capacity 456-MW Upper Tamakoshi Hydropower Project, which is scheduled to be completed by the middle of next fiscal year.
It is going to be added to the national grid soon, ending the country’s reliance on power import at least during the rainy season, wheresas according to the preliminary data of the Ministry of Agricultural, Land Management and Cooperatives, paddy production will fall to 5.1 million tonnes, a decrease of 1.5 per cent from a year earlier in the current fiscal year. However, the production of other summer crops is expected to increase this year compared to the previous year.
"Production of summer crops like maize and millet is expected to increase in fiscal year 2017-18 compared to the previous fiscal year while the industrial grow rate is estimated to go down," ADB country director for Nepal Makhtor Khamudkhanov, on the occasion, said.
The Macroeconomic Update also sheds light on the importance of agricultural commercialisation in Nepal and the need for its effective implementation by addressing legal, institutional, financial and infrastructural barriers.
With about one-third share of GDP, agriculture continues to provide livelihood to two-thirds of the country's population, but mostly at a subsistence level," reads the statement.
The report stressed that commercialised agriculture via contract and cooperative farming methods can be one of the major sources of revenue generation for the country if practiced on a wider scale.
The report further reads that even with increased capacity utilisation of industries, industrial growth is set to be lowering in 2018 from the high rate in 2017, due to low investment in the manufacturing sub-sector for years owing to political instability and structural bottlenecks.
"Substantive growth in government expenditures and moderate upticks in investment would drive growth in current fiscal year and government expenditures have increased significantly this fiscal year partly for local, provincial and parliamentary elections," he added.
According to principal economist of the ADB Nepal Resident Mission Sharad Bhandari, "the country requires massive investment in sectors like manufacturing, agriculture and infrastructure, among others, to cope with the existing bottlenecks to leap forward towards higher growth trajectory.
"Low investment is the major constraint to achieving the desired growth target," he said, adding that the service sector will, however, remain buoyant given the expansion of wholesale and retail trade, financial intermediation and travel and tourism sub-sectors.
"We are happy that Nepal received nearly a million tourists last year, cheering the service sector, but this is not enough looking at the potential Nepal possesses,” Bhandari said, adding that this is one area that can improve things in Nepal. "Amid concerns about ballooning imports, imports were likely to increase considering the level of investment in infrastructure like roads, hydropower, cement plants and hotels."
Average annual inflation is expected to rise moderately to 5.5 per cent in the current fiscal year from 4.5 per cent in the last fiscal year 2016-17. "This is below the inflation target of 7 per cent set by the budget – in the fiscal policy – and the central bank – in its monetary policy – for the current fiscal year.
Likewise, revenue collection has increased by about 21 per cent year-on-year in the first seven months of the current fiscal year compared to the same period last fiscal year.
On the demand side, substantive growth in government expenditure and a moderate uptick in investment will drive growth. The construction needs, particularly for establishing provincial and local governments, the acceleration of post-earthquake reconstruction, and planned disbursement of relief grants to earthquake victims will induce growth, the report reads, adding that the government’s expenditures have increased significantly this fiscal year partly for local, provincial and parliamentary elections. "Additionally, the government has apportioned a fiscal transfer of Rs 232.2 billion – about 8 per ent of GDP – to the local and provincial governments.